Craft beers brew up booming business across USA

Oscar Wong has been a beer man since the day he and a buddy caught the lusty aroma of a homemade brew from a janitor's Pepsi bottle back at his alma mater, Notre Dame University.

"We said, 'That ain't Pepsi,' " says Wong, 71, who emigrated to the U.S. from China in 1959. That day a half-century ago, Wong started making his own beer, and a lifelong passion of making a product he says "brings smiles to people's faces" poured forth.

Wong's Highland Brewing is now in its 18th year in Asheville, N.C., one of many hot spots of the brewing of "craft" beer, the specialty suds heavy on flavor, experimentation and local identity. Ten other breweries have opened in Asheville since 1994. Nationally, from Sam Adams, which makes 2 million barrels a year, to Wong's 29,000, the industry is growing robustly.

Even as U.S. beer consumption overall is flat, the craft brew market is booming, with double-digit sales growth last year. The Brewers Association says that since 2004, craft brews have doubled their market share to nearly 6%, and that 250 breweries opened last year. The 1,940 operating in 2011 were the most since the 1880s, the industry group says.

Big and small brewers alike are capitalizing on a confluence of trends in palates, cooking, economics, demographics, even politics.

The buy-local movement, coupled with a political push against big corporations, skews toward local brewers. Palates have evolved to expect choices and local flavors in cheese, coffee, bread. Why not beer?

Chefs are pushing wine and beer pairings with food and cooking more with beer. Beer industry analysts say a new generation of beer drinkers in their 20s and 30s were raised as children of choice and are less likely than their parents or grandparents to pick a Bud or Miller Lite for life. More young women are drinking beer as part of the celebrity chef, fun-dining phenomenon that focuses on social experience as much as sustenance, with great interest in the stories of the food and beverage and the people who put them together.

"Beer drinkers are much more knowledgeable than 15 years ago," says Paul Gatza, director of the Brewers Association. "Local is a major purchase-decision point these days, so local brewers that keep money circulating in a community is where people want to put their money. And the beer drinker is starting to discover hops" the same way wine drinkers know grapes.

In 2011, the association says, a rough economy and continuing competition from wine and spirits drove overall beer consumption down by 1.3% to just under 200 million barrels. A barrel contains 31 gallons.

But consumption of craft brews, with names such as Cooperstown, N.Y.-based Brewery Ommegang's Three Philosophers, or Wong's caffeine-infused Thunderstruck Coffee Porter, was up 13%, the Brewers Association says. The group says 11.5 million barrels were made by local breweries in 2011, and breweries with an estimated 3 million barrels of capacity are being built or planned.

"Contrary to what some people are saying, we are not in a bubble," Brewers Association President Charlie Papazian told a record 4,500 attendees at the Craft Brewers Conference in April. "We are knee-deep in foam, and the level is rising."

Good times, bad times?

Some are more cautious, recalling a 1990s hangover from an earlier craft-brew boom.

Harry Schuhmacher, editor and publisher of Beer Business Daily, agrees with Brewers Association projections that craft brews could claim 10% of the beer market by 2017, but he cautions against an "irrational exuberance" that "brings non-brewers into the industry."

"We could end up like we did in the late '90s, with bad batches of beer out there, without regard for freshness or quality," he says. "If that happens, history shows us it dampens the whole category."

But he and other industry experts say beer distributors are far more savvy and demanding today and that beer drinkers are a lot different, too.

"Beer was a little slow to the (expanding choices) game," says Eric Shepard, executive editor of trade publication Beer Marketer's Insights. "People just now are looking for a more flavorful, local product. Bread went that way, cheese went that way, candy, to a certain extent. The question is, how far will it go, and how will the big brewers begin to navigate it?"

Both Anheuser-Busch, which annually produces just under half the beer sold in the USA, and MillerCoors, which brews about a fourth, have jumped in. MillerCoors formed its Tenth and Blake division two years ago to make and market craft beers. Its Blue Moon has become a strong label, even if purists say it doesn't qualify as a craft beer.

The Brewers Association defines craft beer as that made by a relatively small, local or regional brewery, producing fewer than 6 million barrels annually, and that is less than 25% owned by big brewers. That definition includes Sam Adams and its national identity but not regional beers such as Anheuser-Bush's Chicago-based Goose Island or MillerCoors' Leinenkugel, which is marketed as a "northwoods" beer out of Wisconsin.

"We don't concern ourselves with what the Brewers Association defines as a craft brewer," MillerCoors' Peter Marino says. "We make beers for the enjoyment of consumers."

To some, the dispute is beside the point. "Consumers define craft beer as any American-made beer that has more flavor than your average light lager," Schuhmacher says.

"The whole thing behind it is just a bunch of dedicated people who believe in their craft," says Folkman, who cooks with beer and travels the country hosting beer-food pairing dinners sponsored by Ommegang. "They want to push the envelope of what people consider a normal beer or a typical beer."

Two recent diners at his restaurant, John O'Bryan, 37, and Jennifer Douris, 32, both of Washington, D.C., spent more time looking at beer than the menu. They eventually sampled four beers from Folkman's 70-plus craft brew offerings.

Her favorite is "Hennepin," an Ommegang ale that she describes as "complex, but not heavy." His favorite is "Brew Free or Die," a heartier India Pale Ale made by San Francisco brewery 21st Amendment, named after the amendment that ended Prohibition.

O'Bryan and Douris say they like the experimentation and the friendships they've formed among fellow craft brew folks. They're regulars at another craft brewery in D.C., Meridian Pint, which hosts tutorials on varieties and tastes and sponsors homebrew taste competitions.

Economic tap-out

Despite the boutique beer boom, more than half the beer in the USA is consumed by people making less than $50,000 a year, says Chris Thorne, vice president of communications for industry group the Beer Institute. They tend to drink more mainstream brands, and consumption has been hit hard by the economy. "There is a mistaken belief that people in poor economic times drown their sorrows in beer," Thorne says. "It is just the other way around. A guy who may have had $50 a week to spend on beer may now have $10."

Some see the craft boom itself as a reaction to weariness about the poor economy. "Maybe we are just tired of this recession and we are going after affordable luxuries more," says Jennifer Litz, who covers craft brews for Beer Business Daily.

Litz, of Austin, belongs to Girls' Pint Out, a national organization that brings women together for craft beer tastings.

"I know a lot of female hopheads, definitely," Litz says.

Anheuser-Busch's vice president of marketing, Paul Chibe, says that "Gen Y or Gen Xers are used to a lot more variety in food and beverage" and says beermakers are going with the trend.

"Sushi was not mainstream 25 years ago," he says. "Now, you find it in the smallest strip malls."

Folkman invites epicurean adventure at Granville Moore's, where he is as likely to recommend a beer as a wine to pair with a dish. He is known for his beer-based recipes, most recently a soft-shell crab sauce combining cream, sugar and Ommegang's "Art of Darkness" dark ale.

In April, Folkman, Ommegang and Saveur magazine hosted a "Hop Chef" competition among 20 top chefs. The winning main course used Three Philosophers, a Belgian-style ale blend, to cook ox tail and sea urchin. The winning dessert was a crème brûlée made with Witte, a Belgian-style wheat ale.